1. Draw the indifference curves for the following individuals preferences for two goods: hamburgers and beer....

1. Draw the indifference curves for the following individuals preferences for two goods: hamburgers and beer. • Al likes beer but hates hamburgers • Yao eats one hamburger and washes it down with one beer. She will not consume an additional unit of one beer without an additional unit of one hamburger and vice versa. Juan hates hamburgers and he hates beer

Solutions

Expert Solution

a. Al likes beer but hates hamburgers

Hamburger is the bad good and the ICs looks upward sloping as shown in figure a). The arrows shows the direction of increase in utility.

b) Yao eats one hamburger and washes it down with one beer.

For Yao, both goods are complementary and must be consumed together. Hence, the ICs are leontief ie L shaped

c) She will not consume an additional unit of one beer without an additional unit of one hamburger and vice versa

Again, both goods are complementary and must be consumed together. Hence, the ICs are leontief ie L shaped

d) Juan hates hamburgers and he hates beer

For Juan, both goods are bad. So, ICs are concave to the origin with increasing MRS. Direction of utility increase is downward.

**if you liked the answer, then please upvote. Would be motivating for me. Thanks.

Rahul Sunny answered 1 year ago

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